Global Supply Chain Management

Preface i
Author Profile ii
Table of Contents iii
Table of Figures vii
Table of Tables viii
CHAPTER 1. INTRODUCTION TO MANAGING GLOBAL SUPPLY CHAINS 1
Opening Vignette: Li & Fung explains the company’s global supply chain operations 1
Supply chain and supply chain costs 2
Network-level competition and its implication 4
Globalization and fragmentation of supply chains 8
CASE. T-shirts Made-in-Globe 10
Key trends and recent topics for managing global operations 12
Inventory visibility and supply chain visibility 12
Supply chain risk management 14
Tailored to local tastes 15
Integrating the digital and physical worlds 15
Career paths in global supply chain management 16
CHAPTER 2. REGULATORY INFLUENCE ON INTERNATIONAL TRADE 18
Opening Vignette: Foreign-trade zones are getting busier in U.S. 18
Customs duties 19
Harmonized Tariff System codes 21
EXERCISE. Calculate the customs duty for importation 23
Import license and export license 24
Country of origin 25
Free-trade zone and its benefits 29
CASE. BMW saves duty payments using FTZ in South Carolina 30
LEGAL CASE. BMW v. United States on imposition of harbor maintenance tax 31
World Trade Organization (WTO) Agreement on Trade Facilitation 32
CASE. Cambodia’s progress in improving customs procedures 32
Regional trade agreements 33
CHAPTER 3. IMPORT AND EXPORT PROCESS 35
Involved parties and contracts 35
Documents for import/export 37
Transportation documents 37
Commercial documents 41
Customs documents 42
Financial documents 43
Procedures for documentary credit 44
customs clearance 46
Export/Import procedures 48
CHAPTER 4. DELIVERY AND PAYMENT TERMS 52
Delivery terms 52
Short description of the Incoterms® 2010 (offered by ICC website) 52
The logic of the Incoterms® 2010 54
Incoterms® 2010 reflecting changes in business practices 58
Terminal handling charges are the frequent cause of disputes 59
Incoterms: which one should I use? 61
Incorporating Incoterms into contracts 62
North American FOB usage 63
Payment terms 64
Payment currency 64
Payment conditions 66
How to fill in Bill of Lading for documentary collection and for documentary credit 68
How to write an international commercial contract 70
An excerpt from the ITC’s Model Contract - the payment term section 71
CHAPTER 5. INTERMODAL TRANSPORT AND LOGISTICS SERVICE PROVIDER 73
Opening Vignette: Alliance network providing end-to-end logistics service 73
Intermodal container 74
Intermodal freight transport 77
CASE. Panama expansion and its implication to shipping routes 78
Shipping liners, freight forwarders, and multimodal transport operator 80
Ocean carriers 80
Freight forwarders 82
Multimodal transport operators 83
Carrier liability vs. Cargo insurance 84
Carrier liability 84
Limits of carrier liability 85
Cargo insurance 86
Do I need a cargo insurance? 87
Third party logistics, 3PL 88
CASE. 3PL provider, Dachser carrying out global logistics operations for Otis 89
CHAPTER 6. TRANSPORTATION COST 91
Opening Vignette: How California wine is distributed to U.S. 91
Selecting mode of transportation 92
EXERCISE. Air vs. ground transportation considering freight cost and transit time 95
Calculating the annual inventory carrying cost rate 96
Transportation economics 97
Less-than-container load shipping 100
LCL shipping process 100
How is LCL Shipping Priced? 102
Truckload (TL) and Less-than-Truckload (LTL) operations 104
Calculating freight costs in U.S. domestic ground transportation 105
CHAPTER 7. GLOBAL SOURCING AND COST ANALYSIS 109
Opening Vignette: Ingersoll-Rand analyzes the true cost of global sourcing 109
Global sourcing 111
CASE. Three reasons why U.S. cotton is chosen by cotton buyers all around the world 112
Sourcing process in general 113
Additional costs of global sourcing 114
Landed cost 116
Total cost of sourcing 117
Cost analysis: global vs. local sourcing 120
EXERCISE. Purchasing wiring harness: global supplier or local supplier 120
CHAPTER 8. GLOBAL OUTSOURCING AND OFFSHORING 123
Opening Vignette: Outsourcing call centers return, to US homes 123
Global outsourcing 124
China’s open door policy and Hong Kong’s outsourcing 125
Electronic manufacturing services (EMS) 126
Original design manufacturer (ODM) 127
CASE. Google’s use of ODM for Nexus smartphone 128
Service-level agreements (SLA) to manage outsourced services 129
Offshoring 131
Re-shoring 132
Chinese labor ? totally changed 133
The hidden costs of offshoring 134
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^^Table of Figures
Figure 1.1 Anheuser-Busch's Supply Chain 2
Figure 1.2 Honda's supply chain for a center console assembly of an Accord model. Choi & Hong (2002) 5
Figure 1.3 T-shirts' global supply chain 10
Figure 1.4 Breakdown of the supply chain costs of Men's shirt. National Public Radio (2013) 11
Figure 1.5 Inbound supply chain visibility: Industry responses to Aberdeen Groups’ survey 13
Figure 1.6 Outbound supply chain visibility: Industry responses to Aberdeen Groups’ survey 13
Figure 2.1 Determining HTS-US code and duty rate for copper cathodes 23
Figure 2.2 NAFTA Certificate of Origin form 27
Figure 2.3 Instructions for NAFTA Certificate of Origin 28
Figure 3.1 Multiple parties and contracts in an international trade 35
Figure 3.2 Straight bill of lading 38
Figure 3.3 Order bill of lading 39
Figure 3.4 Export packing list example 41
Figure 3.5 Documentary credit: a typical transaction 45
Figure 4.1 Incoterms 2010 illustrated by Montezuma 58
Figure 4.2 Unloading handling and container transfer handling at a destination terminal 60
Figure 4.3 Payment currencies versus trade 65
Figure 4.4 Completing a bill of lading for a cash-in-advance or open account payments 68
Figure 4.5 Completing a bill of lading for a documentary collection 69
Figure 4.6 Completing a bill of lading for a documentary credit 69
Figure 5.1 Load bearing of container stacking is at the 40 ft coupling. 75
Figure 5.2 20-foot containers have forklift pockets, accessible from the sides. 75
Figure 5.3 Truck driver picking up an import container at a container yard 76
Figure 5.4 Transit through expanded Panama Canal (Picture taken in September 2016) 77
Figure 5.5 Land bridge can reduce the transit time and avoid the expensive passage through the Panama Canal 78
Figure 5.6 Trade routes from East Asia to U.S. East Coast. Source: Webster(2015) “Redrawing global shipping routes” 79
Figure 5.7 Container shipping companies worldwide based on number of ships as of November 2017 81
Figure 5.8 World container ship fleet: Total capacity and actual trade carried by them 82
Figure 6.1 Trade-offs between freight costs and speed 92
Figure 6.2 Impact analysis: Train vs. Truck vs. Ship. Comparative study by New Zealand Transport Agency 95
Figure 6.3 Larger capacity transportations are less expensive per unit of weight. 97
Figure 6.4 Economy of scale illustrated in freight rate for trucking 97
Figure 6.5 Economy of distance 98
Figure 6.6 Container freight stations of international ocean carriers vs. Container yards of local domestic LTL carriers 100
Figure 6.7 Proper packaging is a shipper's responsibility. 101
Figure 6.8 A price quote for a LCL seafreight from Florida to Sydney 103
Figure 7.1 The USDA testing of cotton tells importers exactly what they are buying. 113
Figure 8.1 CFI Goup’s (2010) Customer satisfaction survey results 124
Figure 8.2 “Breaking it down: Google Nexus One smartphone,” CHaINA, March/April 2010 129
Figure 8.3 Five year projection of the present TCO of Table 8.2, considering wage inflations and currency risk. 137

^^Table of Tables^^
Table 1.1 The Gartner Supply Chain Top 25 for 2017 7
Table 1.2 Exports of goods and services* (% of gross domestic product) 9
Table 2.1 The tariff rates for imports to the EU from other countries 20
Table 2.2 China's import export licensing framework 25
Table 3.1 Time Limits for submitting cargo declarations as specified in EU Customs Code 47
Table 4.1 Risk and Cost allocation to buyer/seller according to Incoterms 2010 56
Table 4.2 Payment conditions 66
Table 5.1 Dimensions of commonly used cargo containers 74
Table 6.1 Cost structure of an airline 98
Table 6.2 Rate Basis Number determined by From/To cities 105
Table 6.3 Freight classes based on shipment contents 106
Table 6.4 Freight rates for sample freight classes 107
Table 7.1 A typical U.S. cotton farming in numbers 112
Table 7.2 Total cost of sourcing from China by Platts and Song (2010) 118
Table 8.1 Reshored+Foreign direct investment (FDI) manufacturing jobs. Source: Reshoring Initiative 2016 data report 132
Table 8.2 Comparison of U.S. vs China according to TCO Estimator developed by Reshoring Initiative 136